Bill Mitchell – billy blog

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The world’s press is once again whipping up the “Greece to exit” frenzy and wheeling out all manner of mainstream economists who are issuing the most strident warnings that Greece needs the Euro and will walk the plank if it exits. Most of this is conservative hype. The reality is that while the exit would be immediately costly – the situation is currently so dire and the outlook so negative – that these “costs” have to be weighed against the almost immediate return to growth should the nation exit and default. Apparently, the Greek political elites (the President and the two main party leaders) are proposing that the recent election, which overwhelmingly rejected the Troika-led austerity, be ignored and, instead, a government of technocrats – all of whom will play ball with the Troika, be installed to rule the nation. The machinations of the neo-liberals never cease to amaze me. Greece should take a lesson out of the Iceland book. But then they had a President who seemingly cared about national interest.
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I read the latest “fiscal stimulus has not made a jot of difference” Op Ed from Harvard’s Robert Barro as a classic example of how mainstream economists manipulate data that few understand well to support a case that is the opposite of the facts. nd wondered why he bothers. My profession are experts at either denying that facts are facts (the “when all else fails” strategy – that is, if the facts are inconsistent with the theory then the facts are wrong) or using data selectively when they know most people interpret economic data in a superficial and intuitive manner that often leads to wrong conclusions. The Wall Street Journal article (May 9, 2012) – Stimulus Spending Keeps Failing – which carried sub-title challenge “If austerity is so terrible, how come Germany and Sweden have done so well?” was typical Barro. I realise he cannot perform a detailed data analysis in a standard Op Ed (which is one of the great advantages of blogs). But with the sparse word-limit available in an Op Ed, the writer should also stick to the facts and draw relevant rather than spurious conclusions from the facts presented.
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CNBC’s Head of News, one Patrick Allen produced this article (May 10, 2012) – European Central Bank Leveraged Like Lehman – which several readers E-mailed to me suggesting that there was a problem that had to be addressed and would prevent the ECB funding member state deficit increases in pursuit of growth. The only problem I am afraid to say is the “author” doesn’t know much about the subject that he is writing about. This, sadly, in a general problem out there in commentary land. The article was in fact reporting the views of one Satyajit Das who gets a lot of airtime on national radio in Australia and elsewhere but perpetuates many of the mainstream myths about the way the monetary system operates and its limits and propensities. Das mixes factual statements (which I agree with) with causalities and reasoning (which I do not agree with). The journalists then build their stories based on an uncritical precising of so-called experts like Das and the myths then spread. Let us be absolutely clear. There is no meaningful comparison between the ECB and Lehman or any central bank and any private bank. Further, the ECB cannot go broke.
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